Key Points:
Using most of the principals in this article, the author has managed to pay down $45,000 in debt in just under three years.
Tracking your debt and finances is a good place to start
Making changes to your spending can have a positive effect on your finances
Its never too early to start thinking about retirement and goal setting may be an important tool to achieving retirement
Personal finance takes time and can be improved through study, evaluation and reading
I had some real reservations about writing this article. (In fact I went from real specific during my first draft to real general on this current draft) I thought "Was it too personal?" "Does it reveal too much information about myself?" "What will people think about the financial shape I am in?" In the end I decided to go ahead and write this article BECAUSE it deals with something near and dear to my heart...where I am at with my finances currently, where have I been and am I on track to meet my financial goals. Hopefully, my honesty in where I am at financially can help you be honest with yourself and start examining or re-examining your financial situation.
I consider myself a lucky guy, I have good health, a GREAT family, and I earn a decent living. But eight years ago I was going through a divorce and the girl I was dating at the time told me something I will never forget "You check all the boxes off for husband material except for your finances." Fast forward three years later, I was getting remarried to a different woman (my current wife and love of my life) and was sick of working 50 hours a week. I wanted to retire at that moment.
I knew I wasn't eligible in my job to retire, I had a 401K plan, but was far off the personal goal I had set. But "Would I be able to retire when I became eligible?" was a question I had to ask myself. I therefore needed to start looking at my finances. In doing so I started an excel spread sheet listing all my debt (house, credit cards, medical bills) and updating it monthly versus what I was saving and placing in my 401K savings. I also started a second spreadsheet for my monthly finances. In doing this simple exercise I realized something very quickly, I was way behind the ball.
I started this spreadsheet in August of 2015, this included 4 credit cards, and a home loan. (I was fortunate at the time my car was paid off.) This financial situation only would get worse, I was scheduled to take a guys trip to Las Vegas. When all the bills came in from the trip, Christmas came and went then a Wedding and honeymoon with my now wife in January of 2016. When all of the debt of these expenses was added up, my overall debt increased over $9,000 more in debt in just three months!!! This boggled my mind. I needed to take some action.
Unfortunately, I had to take a loan out on my 401K. Something I hated to do, but the interest rate of a then 1.5% was much better then the 17-22% I was currently paying on my credit cards. I then began scouring the internet for any advice on how to begin digging out of this mess. It was at that time I found numerous articles on personal finance, retirement and a book which would change my life.
"The Total Money Makeover" by Dave Ramsey
I bought the Total Money Makeover book pre-read on Amazon for .01. The book itself is broken down into very simple sections:
- Save $1000 for an emergency fund
- Payoff all debt using a snowball method
- Save 3 to 6 months of expenses for emergencies
- Invest 15% of your income into Roth IRA or pre-tax retirement funds
- Save for your children's college education
- Pay off your home early
- Build wealth and give
The most important piece of information I took from "The Total Money Makeover" which was not listed above was to sell everything and cut back on all unnecessary items. Get an extra job, do whatever it takes to get out of debt. For example, in doing this I had to sell all the stock I had purchased when the economy was still recovering from the recession. This included selling stock in Alibaba (BABA), Disney (DIS) and Bank of America (BAC) to name a few.
I sold Alibaba at $77 a share, today it is $178
I sold Disney at $70 a share, today it is $112
I sold Bank of America at $14 a share, today it is $31
I sold this all this stock and others also and was able to payoff my first credit card. (While I needed to accomplish this at the time it does hurt looking back that I missed out on an almost 120% increase in the price of these stocks). At the time, paying off the credit card freed up about $120 a month which, I could now apply to other debt (Snowball method).I was then able to increase what I was paying per month towards paying down my other credit cards with the extra $120. As one credit card was finished being paid-off, I then re-allocated those savings to my other credit cards.
I also cut out unnecessary purchases. I became "Cheap". I went from eating out everyday at work to brown bagging it. Previously, I was spending $10.00 a day for lunch and WAWA in the morning four times a week ($40.00 a week) or ($160.00 a week) or ($1920 a year). This debt is now gone! My wife who is very supportive began coupon clipping. Between couponing and discounts at Shoprite our food bill is currently cut anywhere from 30% to 50% a week. It may not sound like much, but if you spend $150.00 a week on groceries that can add up to ($45 to $75 a week) or ($2340 to $3900 a year).
The next part was very embarrassing, I had to go into the Comic Book (Conquest Comics) store I frequent and tell them I had to cut back on the books I purchase to 3 a month. Prior to this I was spending anywhere from $25 a week to $60 a week there. (Savings of $1300 to $3120 a year estimated.) While I really enjoyed the Comic store, and while the people who work at Conquest Comics are extremely friendly. I could no longer afford to keep spending this amount of money on a daily basis. I would however encourage anyone interested in Comic books or collectibles to visit there.
The biggest item, I had to give up though was gambling. While I cannot put a number on how much I was playing either on-line or at the Casino, or how much I was losing or winning. I can say for sure that after the guys trip to Las Vegas, I had already stopped gambling. Since August of 2016, I can say I have only gambled 3 times. ( I am considering a future Steemit article on internet gambling and what my system was!)
Lastly, I deleted all the Apps on my phone which sell products or services. This included EBAY. I do use Groupon and when the family recently went to Sesame Street we were able to save over 40% on the purchase of our tickets. Some other things I do to nickel and dime my saving include going to movies on Tuesday nights, its only $5.00 at the local AMC. I call the cable company monthly (yes its a pain and frustrating) to try and see if there are plans to save me money. We have also raised our air conditioning this summer and we have it set at 73 degrees. It was previously set in the past years at about 70 degrees.
I have not had to do anything as drastic as move people into our house, or eat only macaroni and cheese. My one friend who I always try and learn from financially goes around his house and unscrews light bulbs (Who does this?!?) to save on his electric bill. When I told my wife I wanted to try this to save on our electric bill, I was promptly hit on the back of the head.
Joking aside, while I have not used every piece of advice "The Total Money Makeover" provided it was an excellent start. I then started adapting and applying other principals I learned about saving money from various sources. I was not only able to start saving money again, I paid off the 401K loan, I was also able to start buying stock again (what I can afford), have an established emergency fund, I have already started a college fund for my daughter and now pay for things in cash. I am not totally in the clear debt wise. I do have one outstanding loan at 3.5% which I am expecting to pay off a year early and my mortgage (hopefully ten to fifteen years early).
I still put in the extra hours at work, I am still "cheap", and still brown bag it with my lunch to work everyday. One other thing I want to add, which I learned the hard way. People are not always supportive of these changes. Those who you talk to about what you are doing to effect a positive change in your life financially will not always support you or cheer you on. Sometimes, its jealousy or a lack of care or understanding about their financial future. Debt in general is a very hard issue to talk about, it makes people emotional, cry, stress, loss sleep or fight.
As I write this I am reminded of the quote from the Jack Reacher movie with Tom Cruise "Look at the people. Now tell me which ones are free. Free from debt. Anxiety. Stress. Fear. Failure. Indignity. Betrayal. How many wish that they were born knowing what they know now? Ask yourself how many would do things the same way over again? And how many would live their lives like me." (If you have never read any of the Lee Child, Jack Reacher novels I highly encourage you to do so.) In the novels and movie Jack Reacher essentially lives as a vagrant traveling from place to place with only a passport, a toothbrush and an ATM card.
Final Thoughts
Personal Finance is not taught in a classroom, not in grade school, not in high school and not in college as a core requirement. It takes discipline and I continue to keep track on my spread sheet. There have been months where I have relapsed (Christmas this year was very tough) but the goal is to continue to achieve total debt relief and put myself in the best possible situation for when I do consider "retiring."
Author's note: This article is all my opinion and should not be relied upon for predictive behavior or outcome of any stock, advice on debt or financial advice. It is all my opinion. You can follow me on Twitter @TheMoonknight77 where I mainly follow NWBO, send prayers for cancer patients and post Steemit articles on topics which I enjoy. Yes I am NWBO Long and a share holder. I also anxiously await the next Jack Reacher novel.
"Personal Finance is not taught in a classroom, not in grade school, not in high school and not in college as a core requirement." It is the same here in Sweden, strange isn't it? You get taught a lot of things you MIGHT have use for, depending on what you choose to study later on / start to work with, but personal finance that we all WILL have use for is not taught.
Yes it a real shame. I am thinking before my daughter goes to college ( a long ways off) I should sit down and have her take a finance class. Probably before her first car as a bribe : )
Not a terrible idea. They should be teaching basic finance skills regardless.
I am doing "Pay off your home early" this sincerely. I try to manage some extra savings every month and try to get rid of the debt of Home Loan.
I would not have done "For example, in doing this I had to sell all the stock I had purchased when the economy was still recovering from the recession" this because sometimes wealth creation is much better than finding your way out of debt.
Totally 100% agree with you. I am however currently buying NWBO a homerun stock as it will either go to the moon perhaps a 10 to 50 bagger or totally leave me with a zero balance. (See my previous blogs) I am still young enough...cough... cough...that I can experiment in the market like this with this type of stock. I do totally agree however with you about erasing debt first. What can I say I am still a dreamer.
That's good, its better to experiment. Sometimes the experiment fails but you learn a lot from that.
I find you never learn anything from succeeding right away but through trial and MANY errors!
"The borrower is servent to the lender."
Awesome job man, I've been there. Mine was probably a lot worse 180k, only 70k was the house... I look back on it and think "boy I was stupid."
Dave Ramsey is good, I don't agree with everything he teaches but the main principles are definitely sound, and it works. I actually started out with some Larry Burkett stuff, a lot of it is very similar, they have a lot of free resources on https://www.crown.org/ the "Money Map" is great.
Great post, thanks for sharing. You probably saved someone's life by sharing this.
I will definitely check out Larry Burkett and crown.org. Thanks for the info. I still make stupid mistakes every so often but the difference now is I recognize them (mostly afterwards).
Thanks for the post
Well, our hindsight is usually 20/20. I think we all make stupid mistakes, I'm pretty good at making them.
Yeah, dept is very stressful and its difficult to get out of once one is trapped within its cycle. However many people continuously make hundreds or thousand of dollars worth of unnecessary purchases to fill some kind of emotional or egotistical void which simply perpetuates the cycle of being trapped. I think your tips of having savings for a rainy day and deleting all those temptations such as the e bay or Amazon app are an amazing idea ... "out of sight out of mind." Great post !
Thanks for the support! I should mention my wife does use the Wish App and finds great deals from time to time on items. I would just encourage her to not go over board.
While I grew up in a culture where debt doesn't seem to be the norm, (people still go into debt for different reasons )I think I can understand how much weight being in dept can be on a person.
Personal finance is something we all need to learn and practice because without this discipline, we might very well drown in debt without knowing a way out.
I am glad you were able to realize how much of a negative effect debt has and you were able to take actions against it. Hopefully, you will be completely debt free very soon, just as you had planned. Those are really great tips.
Thanks for the support. I will keep everyone updated on how the plan goes.
howdy sir moonknight1977! haha! unscrewing light bulbs to save on electricity, I haven't heard of that one but if that what it takes then I agree if it can help get rid of debt because debt is such a weight on your back.
This is a great post and I love the details of what steps you too. Dave Ramsey is great, I listened to him for years on his radio show and he's helped tens of thousands, probably millions over the years to become debt free so I salute you for going for it and actually sacrificing to get it done, even giving up or cutting down on passions like comic books!
This is so encouraging and I know you've helped alot of people with this post, do you ever listen to Dave Ramsey's radio show? he has people who have followed his advice and gotten out of debt call in and scream .."I'm debt freeeeee!" lol. it's a wonderful freedom which you will experience soon! God bless you!
Thanks for the kind words and encouragement. Totally agree on Dave Ramsey I also listened to him while working overnights and I am always listening for any extra tips he can provide. I always find myself just a tad more motivated to save money after listening to his radio show.
howdy there moonknight1977! oh that is so cool that you listened to Dave Ramsey also, he's great. Think how many people he's saved from financial destruction and how many marriages he's saved!
Do you still work third shift?
Only when I need the overtime. I enjoyed the peace and quiet and it helped out when I was going to school. But I know I read somewhere, that for every year you work that over night shift it can take up to three years off your life. Needless to say I am much happier sleeping at night.
haha! yes sir it is brutal on your health, I worked third shift for about 20 year or so! wow. I can handle it but it's exhausting! wise choice to sleep at night if you can. thank you sir.
I'm a financial adviser and a medical intern. I can relate and agree to what you said about debt. Being a financial adviser (after receiving some training on financial planning) it opened my eyes on how ignorant I was about the flow of money. And how ignorant most people are until they accumulate debt. It's good to see meaningful posts about financial responsibility because the sooner people are aware and observe the principles behind, the sooner they get away from being debt's bitch.
As a medical intern on training in a hospital that confines several medical cases, I have seen countless times how health issues cause severe financial constraints in the family. People with no health insurance and no emergency funds. It's really sad to see these people take so long to receive deserved health care due to financial set backs (something to do with how my country also takes care of its health systems). But most of the burden comes from poorly managed emergency funds. Congratulations on the curie upvote :D
Great point. The number one reason people go into debt is because of medical issues. Insurance is so important. I firmly believe poor health or outrageous medical expenses are why we see so many older Americans working in their sixties.
"The number one reason people go into debt is because of medical issues." This is poor allocation of finances for the wrong medical treatments. Don't get me started on herbal supplements, after reading more about both sides of the story, I came into the conclusion that a lot of the medical expenses people get just to improve their health can do more harm than good with all the health scare involved. I'd say not coming to the clinic early already engenders more hospital bills. But that's a lengthy backstory not worth tackling right now :P
Great that you throw away your reservations and share with us your situation and story! I can understand the situation with the shares, I have gone through this myself. The most of them had doubled up now...
Thanks for your advices, some of them are very drastic (like deleting the apps), but i think its worth to try it out!
Unfortunately, we live in a society in which it is becoming more and more normal to get into debt. Also by the fast payment with e.g. NFC. where you dont see real money anymore!
I miss real money as well its very tangible. I believe with the advent of paying bills online personal checks will soon become obsolete in the future, especially with the advent of crypto-currency which I am a huge supporter of.
Oh yes i agree! It looks like crypto could get more and more important in a short time.
I buyed some days ago an amazon Coupon with Crypto and I payed with crypto (nano) some depts caused by real money to a friend. It goes very fast and easy :-)
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Really? I find that extremely fascinating. I strongly believe Crypto will open new payments methods everywhere a lot sooner than many people think.
Yes yes :-) Crypto is connecting more and more third Partys 👍
No advertise and no advise on this point :-) I like bitpanda most. The working in Austria. So looks serious... and they have much links.
A lot of these points seem like common sense to me but I know thats not the case for many. I'm glad it helped you. I see your expenses and I know I would be completely in debt if I lived like that. My only vice as of now is eating out too often and planning a yearly international trip. It's good to help out others by being open about your experience.
Its funny you say that I had the same conversation with my father just prior to posting this article. He said isn't this all common sense stuff? My response was and how many people do you know who are financially "on the ball." After that he said go ahead and write the article...lol
Btw, I love Chinese food so eating out is definitely also one of my vices. But couponing does help there, the guide books and coupon mailers that come every week can dictate were it is I go eat also. 10% or $5 to $10 off are worth it and add up over time.
Thanks for the response by the way!
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Love this buddy. Very informative and helpful .Hopefully it inspires others to take a similar approach as this is a problem most of us here deal with. Also, come in and get yer books ya deadbeat! lol
Thanks for all the help. I very much appreciate it and will definitely get in touch with you soon!
Lol. No problem. See ya soon brother.
I agree with so much of what you say in your article. I'm still young and have a car loan and a mortgage but my finances are in good health. I fully intend on paying them both off well in advance. The main thing for me is that i can still live the life i want to while covering my debts. I can still go for nights out, matches, holidays without worrying about money. I work hard for my money 45 hours a week but life is for living. The worst thing for me would be to hit 70 and not enjoyed myself along the way. I don't earn a spectacular wage but what i do is take care with it.
When i wanted to buy a house i set up a direct debit for every payday until i had saved a deposit. If the money was gone straight away then i had my budget for the rest of the month and it was up to me to live within it. Most of my friends still live week to week to survive but they have $1000 smart phones and $300 shoes and are always trying to keep up.
Where i really made the difference is by not caring about brands. This covers food, clothing, shoes ect... as you can be paying 5 times more for a product just because it has a certain name on the side. I will still buy quality but the name tag doesn't matter to me.
I'm hoping after paying off my two big debts to purchase more property and shares to set up additional streams of revenue as i don't want to still be working for somebody else at 60 and would like to have my options set up. It's not easy but it is doable if people make good decisions and plan for it.
I feel for you and can only encourage you to read as many articles on yahoo personal finance or CNBC money that you can. By the way I still have a iPhone S3 which is so old they tell jokes about it.
Thanks for the comments by the way some sound advice in there!
I do try to make the savings where I can and some of your tips will be tried. Switching providers and looking for offers can be a big one. If you keep going on the track that you are then I have no fear for you in the future because like anything it's a lifestyle choice that was made. When you asked what was really important to you it was about your own health and providing a future for your family. Two very important things.
Don't worry I still have a nice phone in the galaxy note it's just a few years old but won't be getting changed for a while as it perfect. Got it on a good deal. Have fun.
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Another thing I thought of after posting this article was ATM fees 2.00 or 2.50 each week can add up over the course of a lifetime. It may seem like nickel and diming but I would encourage everyone to use the ATM at their own bank.
Thank you for the reply.
True. My bank is decent on that regard as if you keep more than 2k in your account at all time then there are no fees on that account. Totally free for the year. You can see it on holidays though. Atms that charge a fiver to withdraw funds and some cards that can charge up to a dollar per transaction. I can see how this would add up fairly fast.
It's not huge but it's a combination of 20 different little things that make a huge difference every month.
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